“In Malaysia, both COVID-19 and housing affordability remain huge challenges. […] During these challenging times, the government should pay more attention to the local housing demand-supply mismatch and the reordering of state-business relationships in property development.”, writes Dr Keng-Khoon Ng, a lecturer and research associate at the School of Architecture and Built Environment, UCSI University Kuala Lumpur Malaysia.

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Many governments and state agencies in Southeast Asia are shifting towards the operation of ‘property state’ (Haila, 2015) or ‘cities for profits’ (Shatkin, 2017) or ‘neoliberal policies’ (Chen & Shin, 2019). In Malaysia, retirement and second-home properties have been promoted by the government to lure foreigners to buy relatively cheap, free-hold properties in cities such as Kuala Lumpur, Penang, Melaka and Johor Bahru. However, such development tendency has been adding pressure to the provision of affordable housing because developers are keener to develop international property projects than those less-profitable products of local housing. Since 18 March 2020, Malaysia has imposed a series of entry and movement restrictions in response to the COVID-19 pandemic. These restrictions brought uncertainty and new challenges to the operation of international property market. This blog discusses the property-related policy responses taken by the Malaysian governments, while reflecting on a prevailing concern over housing affordability.

The proliferation of international property development

The proliferation of international residential property development is bound up with the Malaysia My Second Home program (MM2H), a special long-term visit pass (renewable every 10 years) for foreigners to reside in Malaysia. This investment migration program was introduced by the Ministry of Tourism, Arts, and Culture in 2002, with 42,000 participants having been approved to date. To encourage property-buying, for example, MM2H participants are allowed to withdraw partial of the required fixed deposit from the second year onwards (RM50,000 for aged 50 years and above or RM150,000 for aged 50 years and below) for expenses related to house purchase. It is important to note that, since 2020, the federal governments lowered the minimum price threshold from RM1 million to RM600,000 (under condominium/apartment segment) for the purchase of properties by MM2H participants with an attempt to solve property overhang. A total of 31,661 unsold residential units recorded by the end of the first half of 2020 for whole Malaysia, while Johor (6,166 units) and Selangor (4,865 units) faced the most severe situation of property oversupply (Napic, 2020). Here comes the questions. To what extent has MM2H accelerated capital growth in residential property? Would it have actually worsened the problem of property oversupply and housing affordability?

Despite the fact that there is no government or market data enabling us to answer the above questions, however, the whole idea of MM2H is capitalising on off-shore investment, privileged lifestyle and ability to hold long-term visit pass for small-scale investors. To resonate with Aihwa Ong’s concept of ‘flexible citizenship’ (1999), MM2H elucidated such intention by maximising capital accumulation from strategies of migration and border-crossing flexibility. In recent years, both local and foreign developers have taken a great advantage from this opportunistic policy to scale-up their international property development. For example, Iskandar Malaysia regularised the formation of international zone in Iskandar Puteri (formerly known as Nusajaya) to allow more than 25,000 residential units built for the speculative market of ‘seamless border-crossing living’ between Singapore and Southern Johor (see Ng & Lim, 2017; Ng, 2020). A series of exclusive facilities such as international boarding schools, a world-class theme-park, a private yacht marina, healthcare centres and hotels have been developed to create a lifestyle matching the international standard. Forest City by Country Garden Pacificview is another housing mega-project where a well-capitalized Chinese developer has ventured into the emerging market of international property in Johor. This project takes the cue from Beijing’s promulgation of the Belt and Road Initiative to lure homebuyers from China and the neighbouring regions. These high-priced housing projects, however, did not make any direct contribution to the provision of affordable housing for Malaysians. To this end, MM2H can be best understood as a result of contingent overlaps of capitalist interests by state and real estate developers.

COVID-19 and the ‘Malaysia My Second Home Program’

The COVID-19 outbreak in Malaysia has caused an unprecedented disruption to the international property market and the operation of the MM2H program. As a result, new applications for MM2H have been suspended with no clear direction of when the program is to resume. This sudden decision has disrupted international property sales. Furthermore, movement restrictions triggered by the pandemic have reshuffled the MM2H holders’ privileges of border-crossing and visiting their Malaysian homes. For example, the Johor-Singapore border closures have a far-reaching impact on everyday border-crossing practices, not to mention the existing business of international property. Although MM2H pass holders may apply for entry permission to return to Malaysia, the government enforced entry restrictions on foreigners who are travelling from countries that have recorded over 150,000 COVID-19 cases. In addition, all passengers travelling into Malaysia are required to serve a two-week-long mandatory quarantine at dedicated quarantine centres.

Several MM2H pass holders and consultants reported to local news media regarding their dissatisfaction over a lack of clear directions and considerations given by the Malaysian authorities (see Free Malaysia Today, 22 May 2020; The Star, 9 June 2020; Thomas, 2020; Davison, 2020). In brief, they wish for MM2H pass holders to be treated equally as citizens because they have been contributing a large amount of direct investment to the country’s economy. To a certain extent, these situations expose the instability and vulnerability of the MM2H program. For the government, perhaps the time is ripe to think more rigorously about this investment migration program in terms of risk management, investor relations and inclusiveness. For the real estate developers, the COVID-19 pandemic exposed underlying concerns over ‘sustainability’ of the current business model and growth strategies of international property. What still makes these high-priced residential projects attractive when the selling point of cross-border mobility can no longer be taken for granted? Given a realistic view that the coronavirus pandemic might take up to several years until it is under control globally, the market responses towards international property in the post-coronavirus era remain uncertain.

How helpful are the National Budget 2021 for Malaysians to buy home?

Housing affordability is a prevailing issue in Malaysia, especially for urban dwellers. Between 2002 and 2016, the country’s overall housing affordability worsened significantly where Kuala Lumpur, Selangor, and Johor were ranked under ‘seriously unaffordable’ category (Khazanah Research Institute, 2019). Although there are more than 31,000 unsold units available in the market, these units are simply unaffordable for the majority of Malaysians.

How does the government help Malaysians toward home ownership amid the coronavirus pandemic? Reintroduced under the Short-Term Economic Recovery Plan by the federal government in June 2020, the Home Ownership Campaign provides stamp duty exemption on instruments of transfer (for properties below RM1 million) and instruments on securing loans exemption (between RM300,000 to RM2.5 million), as well as a 10 percent price reduction but limited to those developers who have registered for the scheme. On 6 November 2020, the National Budget 2021 announced a series of initiatives targeted at increasing home ownership. An extension of full stamp duty exemption on instruments of transfer and loan agreements has been granted for first-time home buyers to buy new launch or sub-sale properties priced up to RM500,000.

How helpful are these stamp duty exemption schemes? Put simply, they will only benefit home buyers who managed to secure housing loans from banks. However, banks are likely to tighten lending standards because people’s debt-servicing capacity is deemed to have deteriorated due to potential retrenchment and recession, thus making it relatively difficult for people to own their first home.

Under the Budget 2021, the Ministry of Finance will allocate RM500 million to build 14,000 housing units for the B40 group, representing the bottom 40 percent of earners by income in Malaysia, and RM315 million for the construction of 3,000 units of Rumah Mesra Rakyat by Syarikat Perumahan Nasional Bhd. The government will also be offering a rent-to-own scheme for 5,000 PR1MA units limited to first-time home buyers. While Malaysians are recognising these positive attempts to build more affordable housing in the coming years, there is still a lack of immediate action taken by the government to solve pressing housing concerns. For example, there is a possibility to convert those underutilised public buildings and abandoned shopping malls as short-term solutions for the urban poor or homeless people. Moreover, there is a worrying tendency whereby private developers and government-linked developers are likely to focus on the luxury housing market (Lim & Ng, 2020). For the case of Medini Iskandar Malaysia, developers have been exempted from building low-cost housing as part of corporate social responsibility. In other cases, developers have preferred to pay penalties to local governments instead of meeting their responsibilities. In this regard, local governments should tighten the requirements for private developers to build affordable housing. While the country is actively promoting the MM2H program and international property market, the government must also put effort into answering this question – what is the right balance to juggle capital growth and housing affordability at the same time?

COVID-19 and housing affordability remaining as a huge challenge for Malaysia

Housing is increasingly being regularised towards a new geography of profits and politics in Asia (Chen & Shin, 2019). To turn property development into a rent-seeking mechanism, the government began to intervene housing policies and market-oriented practices. The two roles of ‘control’ and ‘exploit’ allow the government to expand their authority over public and private realms of property development. However, not only may these two roles lead to conflicts of interest between the state and non-state players involved, they also increasingly collide with social justice and governance integrity.

In Malaysia, both COVID-19 and housing affordability remain huge challenges. On the one hand, the coronavirus crisis has exposed new operational issues and policy concerns associated with the MM2H program. On the other hand, the vulnerability of international property market has been attributed to negative market sentiments due to movement restrictions. During these challenging times, the government should pay more attention to the local housing demand-supply mismatch and the reordering of state-business relationships in property development. International property development is a contested field of capital accumulation built upon market speculation. To avoid any irresponsible market speculations, the government should take stronger measures to guard against housing which is built for profit, not for living.

References

Chen, Y., & Shin, H. B. (eds.) (2019). Neoliberal urbanism, contested cities and housing in Asia. New York: Palgrave Macmillan US.

Davison, A. (29 September 2020). Writing on the wall: Is the MM2H programme doomed? Available at: https://www.expatgo.com/my/2020/09/29/writing-on-the-wall-is-the-mm2h-programme-doomed/ (Accessed 10 November 2020)

Free Malaysia Today, (22 May 2020). MM2H visa holder stranded abroad and confused. Available at: https://www.freemalaysiatoday.com/category/opinion/2020/05/22/mm2h-visa-holder-stranded-abroad-and-confused/ (Accessed 26 Oct 2020)

Haila, A. (2015). Urban land rent: Singapore as a property state. Chichester, West Sussex, UK: John Wiley & Sons Ltd.

Khazanah Research Institute (2019). Rethinking housing: Between state, market and society. Available at: http://www.krinstitute.org/assets/contentMS/img/template/editor/Rethinking%20Housing%20(Full%20Report)-%20EN%20Version.pdf (Accessed 14 November 2020).

Lim, G. & Ng, K.K (2020). Chapter 16: Johor’s housing policy and development trends. In: The SIJORI Series: Johor – the abode of development? Hutchinson, F. & Serina Rahman (eds.) p.424-446, Singapore: ISEAS Yusof Ishak Institute.

NAPIC, The National Property Information Centre. Residential Unsold Status H1 2020. Available at: https://napic.jpph.gov.my/portal (Accessed 10 November 2020).

Ng, K.K & Lim, G. (2017). Beneath the Veneer: The Political Economy of Housing in Iskandar Malaysia, Johor, Trends in Southeast Asia, 12/2017, Singapore: ISEAS Yusof Ishak Institute.

Ng, K.K (2020). Chapter 15: Johor Bahru’s urban transformation: authority and agency revisited. In: The SIJORI Series: Johor – the Abode of Development? Hutchinson, F. & Serina Rahman (eds.) p.407-423, Singapore: ISEAS Yusof Ishak Institute.

Ong, A. (1999). Flexible citizenship: The cultural logics of transnationality. Durham, NC: Duke University Press.

Shatkin, G. (2017). Cities for profit: The real estate turn in Asia’s urban politics. Ithaca: Cornell University Press.

The Star, (9 June 2020). MM2H visa holders hoping for clear directions. Available at: https://www.thestar.com.my/opinion/letters/2020/06/09/mm2h-visa-holders-hoping-for-clear-directions (Accessed 26 Oct 2020)

Thomas, J. (7 July 2020). Country’s economy, image at stake in MM2H freeze, say consultants. Available at: https://www.freemalaysiatoday.com/category/nation/2020/07/07/countrys-economy-image-at-stake-in-mm2h-freeze-say-consultants/ (Accessed 10 November 2020).

* The views expressed in the blog are those of the authors alone. They do not reflect the position of the Saw Swee Hock Southeast Asia Centre, nor that of the London School of Economics and Political Science.